Property Auctions

Mastering Property Auctions: Tips and Tricks for Smart Buyers

In this guide, we’ll walk you through how property auctions work, the different types of auctions, and the steps you need to take to succeed.
Written By: James Blackler
On Oct 24, 2024

Buying a property at auction can be an exciting opportunity to find a bargain or purchase quickly. But with the high pace and risks involved, it’s essential to be well-prepared before diving in. In this guide, we’ll walk you through how property auctions work, the different types of auctions, and the steps you need to take to succeed in buying a house at auction.

What is a Property Auction?

A property auction is where properties are sold to the highest bidder. Properties may be listed through a traditional auction or a modern online auction. Auctions are no longer just for seasoned investors or cash buyers—many people buy auction properties with mortgages.

How Do Property Auctions Work?

Property auctions follow a structured process:

  • Traditional Auction: Held at an auction house, buyers bid in real-time. Contracts are exchanged immediately, and a 10% deposit is paid on the day. You must complete the purchase within 28 days.
  • Modern Auction: Typically online, this auction runs for up to 30 days. The winning bidder pays a reservation fee (around 5%) and has 56 days to complete the process, allowing more flexibility—especially for mortgage buyers.

The property is sold to the highest bidder as long as the bidder meets the reserve price set by the seller.

Types of Property Auctions

Traditional Auctions

Also known as unconditional auctions, these are fast and suited to cash buyers or investors. If you win, you exchange contracts and must complete the sale within 28 days. Pulling out after the auction means losing your 10% deposit.

Modern Auctions

Known as conditional auctions, they allow more flexibility. Bidding happens online, and you have more time to arrange finances—ideal for those purchasing with a mortgage. You’ll need to exchange contracts within 28 days and complete the purchase within another 28 days.

Why Buy Property at Auction?

Auctions are attractive for buyers for several reasons:

  • Speed: The process is quick, with set timelines for completion.
  • Potential Bargains: Properties sold at auction are often undervalued or require renovation.
  • Transparency: You see what others are bidding, ensuring a fair process.

But auctions come with risks. It’s essential to be financially prepared and do thorough research.

How to Find Auction Properties

You can find auction properties listed on significant property websites like Zoopla by filtering for auction sales—contact estate agents or auction houses for detailed listings, viewings, and brochures. Always verify the auctioneer’s membership with professional bodies like NAVA Propertymark to ensure their credibility.

How to Prepare for a Property Auction

Preparation is key to success at a property auction. Follow these steps to boost your chances:

 

View the Property

Before bidding, view the property in person. Consider taking a surveyor or builder to assess the condition and potential renovation costs.

Arrange Your Finances

If you’re buying with a mortgage, get your lender’s Agreement in Principle (AIP). This will give you a clear understanding of your budget.

Research the Local Market

Compare the property with similar ones in the area to ensure you’re bidding a fair price. Look at past sale prices to predict future value.

Review the Legal Pack

Ask your solicitor to examine the property’s legal pack, which includes searches and title deeds. This ensures there are no nasty surprises after you bid.

Set a Budget and Stick to It

Set a maximum bid that you’re comfortable with. Auctions can be fast-paced and emotional, so stay focused on your budget.

How to Succeed at an Auction

When auction day arrives, here are three top tips:

  • Have Your Paperwork Ready

Bring proof of identity and finances, such as your mortgage AIP or proof of funds for the deposit.

  • Stick to Your Budget

Avoid getting swept up in the bidding excitement. Stick to your pre-set budget to avoid overpaying.

  • Don’t Be Disheartened

If you miss out on a property, remember that new opportunities arise frequently. Stay patient and keep searching.

What Happens After You Win?

Congratulations! After winning the auction, follow these steps to finalize your purchase:

  • Get a Survey Done

For modern auctions, you can arrange a survey after winning. This will identify any hidden issues with the property.

  • Finalize Your Mortgage

If you’re using a mortgage, the lender will conduct a valuation to confirm the property’s worth. Once approved, you’ll receive a formal mortgage offer.

  • Get Insurance

Immediately after exchanging contracts, get buildings insurance. This will cover you against damages, as the property becomes your responsibility from this point.

FAQs About Buying Property at Auction

Can I buy an auction property with a mortgage?

Yes, more lenders are willing to provide mortgages for auction purchases, especially through the modern auction method.

What happens if I pull out after winning an auction?

If you withdraw from a traditional auction, you lose your 10% deposit. In a modern auction, you lose your reservation fee (typically 5%) and possibly your deposit, depending on when you withdraw.

Are auction guide prices accurate?

Not always. Guide prices are set to attract bidders, so properties often sell for more. Do your research and decide on a maximum bid beforehand.

What are the risks of buying at auction?

The main risks are overpaying, discovering hidden issues after the sale, and losing your deposit if you pull out. Always do your homework and seek professional advice.

FAQs About The Mortgage Blog

  • What is The Mortgage Blog?

The Mortgage Blog is an informational hub offering expert advice on mortgages and property purchasing, including tips on buying property at auction.

  • Does The Mortgage Blog provide mortgage services?

No, The Mortgage Blog offers advice and guidance but does not directly provide mortgage services. However, it can recommend trusted brokers and lenders.

  • How can The Mortgage Blog help me buy a house at auction?

The Mortgage Blog offers in-depth guides and resources to help you understand the auction process, prepare financially, and make informed decisions.

Conclusion

Buying a house at auction can be a rewarding experience if you’re well-prepared. With the right research, financial planning, and professional advice, you can find great opportunities and even secure a mortgage for your auction property. Remember, patience and preparation are the keys to success at auction. If you’re planning to buy at auction and need finance, be ready to move quickly—there’s very little time to complete the purchase. Make sure you can set aside the time necessary to arrange everything.

We see a common pitfall: people wait until after they’ve won an auction to speak to a mortgage broker, even though they knew about the property weeks beforehand. Speaking to a broker early on could make all the difference, giving you a head start on potential lending options. Some brokers can even organize a desktop valuation in advance, streamlining the process further.

If you’re interested in getting auction financing, please call us at 0333 335 6595 or message us to submit an inquiry. We’ll connect you with the most suitable advisor for your needs.

Written by
James Blackler

James Blackler is the founder of The Mortgage Blog
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